Costa Del Sol Property - Help From The Central Bank

The banks in Spain have been doing their upmost to limit  damages caused by the massive boom and bust in the property sector. To shield some of their worst decisions they have been buying back some of the properties that subsequently have had bad payers. The banks have had some help and guidance from, unbelieveably, Spain´s central bank, who is usually pretty conservative in their approach.

There is some degree of logic behind this process. Previously banks had to account for the total value of bad loans. If the mortgages are above 80% of the total value of the real estate in question after two years of non-payment. This was proving to be too much, because the properties all have some residual value. The new rules by the central bank, say that they will only account for the difference between the total of the actual loan and 70% of what the properties current market value is.

This will go some way to helping the banks massage their figures, but realistically speaking the damage to Spain´s financial system runs pretty deep and will take some time to untangle itself.

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